Economy and Currency

ip journal

Greece's election forces Germany to once again confront the possibility of a Grexit

The far left Syriza party is poised to win January 25 parliamentary elections in Greece, and will likely demand a renegotiation of the terms of its continued eurozone membership if it does. Angela Merkel's government in Germany, fearing the precedent this would set for other crisis countries, seems willing to let Greece go instead.

ip journal

Without institutional reform the euro area is threatened with a lost decade

The euro area seems to have weathered the worst of the crises, but longer-term problems now threaten the currency union. Steps must be taken to avoid a decade of stagnant economic growth, even if none of the policymakers involved are eager to discuss them.

Artikel

From Germany’s hard left to the ordoliberal right of the Bundesbank, Goethe offers something for everyone as Germany grapples to understand the euro crisis debate. But is the man himself a model of Germanic thrift or a warning of Greek profligacy? Could his texts be the key to understanding the tortured German euro crisis response?

Karlsruhe has spoken. As most commentators expected, the highest German constitutional court followed the logic of its past EU related rulings: It is not preventing the Europeanization of Germany, but again communicates its concerns about the rights of the Bundestag and other fundamental pillars of Germany’s constitutional order. Germany again proves to be a predictable and reliable player, which is the major message for Europe and beyond.

In its attempts to rescue the euro, Germany is often seen as the odd country out. It blocks constructive solutions with its resistance to either using ECB funds or creating sufficiently large rescue mechanisms for indebted countries and banks, all while insisting on pronounced austerity. However, what is seldom understood abroad is that the German position is about more than limiting its own fiscal exposure.

With the end of the eurozone crisis nowhere in sight, all eyes are turned toward Chancellor Angela Merkel. Her long-term vision is valid, but does she have the ability to overcome the more immediate obstacles Europe faces? The Chancellor needs to make the case for “more Europe” to her fellow Germans and show flexibility in her country’s reaction to the crisis. After all, Germany has profited as much, if not more, from the eurozone than any other state.

Since the beginning of the euro crisis, there has been much discussion of actual or potential German “hegemony” in Europe. Some journalists and academics have described Germany as a “Hegemon wider willen” or a “reluctant hegemon.” Based on this analysis, they have called on Germany to be bolder and to embrace its role as a hegemon.

Poor euro. Not welcome on the block. Greeted in the womb as a soon-to-be-stillborn. Feared to be a deprivation for owners of the “good old national money” it replaced. Caricatured as the “teuro” (cost-inflating euro) despite conspicuously lower inflation in the euro era than in the decades before. Belittled in 2000 to 2002 because of its declining external value (versus the US dollar).

Corporations have learned the difference. And various European nations have learned from their imperial problems in the past. But the super power United States still has this learning curve ahead of it. Takeovers don’t produce the cooperative trust that maximizes productive synergies.

An economic hegemon is a land that is big enough economically and gains enough from an international regime itself, even if no other country contributes. Germany was the nice guy who picked up the EU check. Now it should do the same for the globe.

If one gives Putin the benefit of doubt, this concentration of power in the hands of the president is designed to support his program of economic reforms and the growth of the economy. Whether this can be achieved by authoritarian means and what sort of repercussions this may have for Russian society is quite another matter.